Why the AVA Labeling Loophole Should Be Closed

March 2018
by Richard Mendelson

Wine is the prototypical example of a product of place. Regulatory efforts aimed at protecting against the misuse of wine appellations, therefore, are essential to the industry, providing safeguards for consumers and producers alike.
     In the February 2018 issue, Wines & Vines published an article entitled “Should Out-of-State AVA Use be Legal?” The article refers to the federal rulemaking that is presently pending to eliminate a labeling loophole that currently allows certain wines to avoid federal labeling laws, including laws governing the use of wine appellation names.
     In keeping with its decades-long commitment to protect consumers from deceptive practices and to safeguard geographic place names for wine, the Napa Valley Vintners (NVV) strongly endorses TTB’s proposed rule.
     Federal labeling laws and regulations require that any wine sold in interstate commerce that is labeled with an AVA be derived 85% or more from grapes grown within the boundaries of that AVA, and be fully finished within the state in which the AVA is located. The producing winery must keep strict sourcing and production records to back up its AVA labeling claim. These federal labeling requirements provide the consumer with reliable information about wine origin, including where grapes in the wine are sourced and where the wine is produced.
     However, a winery that sources grapes from another state can avoid these federal wine-origin labeling regulations entirely (as well as other laws that govern use of vintage date and grape variety) by agreeing to sell the resulting wine only in the winery’s home state and applying for what is known as a Certificate of Exemption from Label Approval, often referred to as a “COLA exemption.”
     On Sept. 10, 2015, 51 members of Congress signed a letter alerting TTB that some wines sold in intrastate commerce under a COLA exemption are using AVA designations without meeting the federal AVA requirements.
     In response, TTB has proposed in Notice 160 that all wines – both those sold in intrastate and interstate commerce – abide by the same labeling rules. This makes perfect sense.
     Consumers have a right to know that all wines meet the same standards with respect to such important label designations as appellation of origin, vintage date and grape variety. By law, a 2015 Napa Valley Cabernet Sauvignon sold in interstate commerce is required to be made from at least 85% grapes grown within the boundaries of the Napa Valley AVA, at least 95% of grapes from the 2015 vintage and at least 75% Cabernet Sauvignon, and be fully finished in California.
     As it stands today, however, a winery that sells its wines only in the state where it was produced and uses a COLA exemption can put information on its label that doesn’t comply with the appellation, vintage or variety requirements or the place of production requirement that applies to every wine sold in interstate commerce.
     Many states, most notably California and Oregon, have strict state laws governing wine composition and labeling that apply to all wines made there. If an AVA wine is made from grapes that are transported out of the state in which the AVA is located, the out-of-state producing winery does not need to comply with the same rules as the in-state winery.
     When a wine is exempt from the federal AVA requirements, it leaves consumers and producers in a quandary. They can’t be sure what the AVA means on that wine, and they most likely don’t know that the wine doesn’t meet the same requirements that apply to other AVA wines sold in interstate commerce. Producers are no longer playing on a level field.
     This is why TTB proposed in Notice 160 to make COLA-exempt wines subject to the same appellation of origin labeling requirements as COLA wines. As stated in its Notice, TTB “proposes to amend its labeling and recordkeeping regulations in 27 CFR part 24 to provide that any standard grape wine containing 7% or more alcohol by volume that is covered by a certificate of exemption from label approval may not be labeled with a varietal (grape type) designation, a type designation of varietal significance, a vintage date, or an appellation of origin unless the wine is labeled in compliance with the standards set forth in the appropriate sections of 27 CFR part 4 for that label.”
     Napa Valley Vintners, a nonprofit association with 540 members, and Wine Institute, a public policy advocacy association representing more than 1,000 California wineries and affiliated businesses, fully support TTB’s efforts to close this COLA exemption loophole. Other wine industry associations from well-established wine regions such as the Sonoma County Vintners and Oregon Winegrowers Association as well as from up-and-coming regions such as the Texas High Plains Winegrowers Association also have encouraged TTB to adopt the proposed Notice 160 amendments.
     In September 2016, TTB requested additional public input on its proposed amendments and specifically called for “comments regarding whether any geographic reference to the source of the grapes could be included on a wine label in a way that would not be misleading with regard to the source of the wine.” NVV and Wine Institute put forward a joint proposal that would allow grape source information on COLA-exempt wines while at the same time protecting AVA names as indicators of wine origin. A producer of a COLA-exempt wine, for example, would be able to state on the label that the grapes in the wine were grown 100% in Sonoma County, Calif., but the wine could not carry the Sonoma Valley AVA if it doesn’t meet the Sonoma Valley AVA requirements. Simply stated, no wine can carry an appellation of origin unless it meets the federal requirements for that appellation of origin.
     AVAs were developed to serve consumers as reliable indicators of wine origin. The presence of an AVA name on a wine label signals to consumers where the grapes were grown and where the wine originates. By closing the COLA exemption loophole, TTB will assure consumers that this is always the case, whether the wine is sold through interstate or intrastate commerce.

Richard Mendelson is a wine lawyer at Dickenson, Peatman & Fogarty and has earned a reputation as one of the preeminent wine lawyers in the United States. He also directs t he Program on Wine Law and Policy at UC Berkeley Law. He earned a bachelor’s degree from Harvard College, a master’s from Oxford University and his law degree from Stanford Law School.

Currently no comments posted for this article.